Determinants of financial sustainability in saving and credit Cooperative societies (Saccos) in Tanzania

Abstract

The paper assessed the determinants of Saving and Credit Cooperative Societies (SACCOS) policies on financial sustainability, with evidence from registered SACCOS in Hai District, Tanzania. Specifically, the study examined the influence of credit management policies on financial sustainability, determined the management of loan defaulters towards financial sustainability, and examined the influence of membership enrollment policies on financial sustainability. The paper is guided by three theories, i.e., the Life Cycle Theory (LCT), the Profit-Incentive Theory (PIT) Agency Theory. The study adopted a descriptive research design complemented by a case study research design. The sample size of the study was 138 respondents. The study found that loan repayment terms and conditions are critical factors in ensuring the financial sustainability of SACCOS. Additionally, monitoring and evaluation are critical components of effective loan management, as justified by a significant majority of respondents. Further, the essence of SACCOS limiting loan amounts to collateral value scored the highest estimate and was statistically significant. The study concluded that credit management, loan defaulter management, and membership enrollment can enhance SACCOS' financial sustainability with varying variables. The study recommends that SACCOS should regularly provide training to members on credit issues. Further, SACCOS should continuously monitor the effectiveness of recovery policies by properly elaborating on the loan categorization report based on the time of payment; penalize delinquent loans, and ensure zero tolerance for members with loans in arrears.